How to Save for Retirement While Paying Student Loans

The whole reason you went to college in the first place was to give yourself a better future. You had grand dreams of working hard when you were young and retiring early and having the rest of your life to enjoy without stressing about things like financial stability.

So you took out student loans, so sure that you would land the perfect job after graduation and be able to pay them off again without missing a beat.

Unfortunately, life isn’t always so tidy and now you find that you’re one of the 44.2 million people whose lives are being held back by federal or private student loan debt.

And retirement is getting closer day by day.

You have three obvious options when considering how to tackle the student loan vs. retirement debacle — and for those who know doing your homework doesn’t stop when you throw your graduation cap in the air, there is a fourth option to consider.

1. Loans now, retirement later

For many people, this is the best option. Sure, this will tie up funds for the here and now — something you really need to consider if the near future holds a mortgage or a baby carriage. But if you can scrape by now, you may just come out on top in the future.

By focusing on paying back student loans as soon as possible, you will end up saving on how much you are paying in interest, which often translates to a significant chunk of change.

The drawbacks to this approach are clear, however.

More often than not, the perfect high paying job does not fall out of the sky as soon as you graduate. If you find yourself in an it-will-do-for now job when you get out of college, chances are you don’t have much money to put toward your student loans.

Prioritizing paying off student loans also will tie up a lot of your money for the near future, let alone the more distant future. Retirement is the last thing on your mind and if you’re not careful, it will sit on the back burner for too long.

2. Retirement now with minimum payments on loans

Some people opt for the exact opposite approach.

By prioritizing saving now, you have the comfort of knowing you always have a safety net there when you need it.

However, you can’t just ignore student loan payments. You still have a minimum payment that you must make each month.

On top of that, the longer you wait to tackle your student loans, the more you will eventually have to pay in interest, making this option much more costly in the long run.

3. A little bit of both

This is the middle ground and many people find this to be a happy medium between two extremes.

You pay a little more than the minimum toward your student loans each month and then put a little into savings for retirement.

In the end, you’ll pay some toward interest, but you’ll also have a healthy little retirement saved up.